Credit cards are the most popular online payment option, accounting for more than 90% of all transactions. While the credit card option provides valuable benefits for both the retailer and consumer, a significant number of transactions fail during the credit approval process due to reasons such as card distress, atypical card usage or spending above a periodic limit; this error rate may be as high as 20%.
While the monitoring of accounts for atypical spending and enforcement of credit limits protect the issuer and cardholders against fraud and limit lender risk, the resulting rejections lead to a high rate of purchase abandonment. These gating systems inevitably reject a large number of guileless consumers that would settle their debt per their contractual obligations. A good consumer demonstrating considered intent to execute a transaction could verify their account information, or enter a new credit card number, complete the transaction and merchants would not suffer a loss in sales due to credit card declines. In reality, the inconvenience of providing the card information, together with a potential negative bias formed against the retailer communicating the rejection results in significant lost sales as consumers leave sites rather than attempt their purchase a second or third time, perhaps with a different card. By some estimates, out of the 20% of rejected transactions, half are not completed. As the company has already invested considerable marketing resources to obtain and convert the consumer, these failed transactions result in increased costs and reduced revenue.
The present inventors have recognized that a need exists to provide additional payment solutions that address this problem of purchase abandonment, thus improving consumer transaction completion rates, lowering merchant consumer acquisition costs and bolstering merchant margins.